Monday, September 21, 2020

How Joe Biden Could Make the Health Care System Unravel

A PDF copy of the full report is available here

Joe Biden has billed his health care plan as a moderate alternative to single-payer socialized medicine, going so far as to promise that “If you like your employer-based plan, you can keep it.” But his proposal to allow people with employer coverage to receive federal Exchange subsidies will weaken, and could ultimately eliminate, employer-based insurance.

Under the richer federal subsidy scheme Biden proposes, many individuals of modest incomes will receive significant financial incentives if they move to Exchange coverage. As a result, an estimated 24 million individuals could voluntarily switch from employer coverage to the Exchanges.

Liberals might cheer this development, but it will have major effects on the entire health care system:

  • Massive Federal Spending: If 24 million individuals switch out of employer coverage, Washington would spend approximately $2.2 trillion on Exchange subsidies to cover those individuals. This additional federal spending would not reduce the uninsured rate at all—it would merely substitute federal spending for spending by employers and individuals.
  • Taxes on Businesses: Large firms who offer an employer health plan, but whose workers receive federal Exchange subsidies, currently face a per-worker tax of approximately $4,060 in 2021. Unless Congress modifies Obamacare’s employer mandate—a change Joe Biden has not publicly supported—businesses whose workers voluntarily switch out of employer coverage will face an estimated $481 billion in taxes over ten years. These taxes will not begin to pay for the additional $2.2 trillion in federal subsidy spending, but will harm job growth and economic recovery.
  • Employers Dropping Coverage: Of the 24 million individuals who could switch out of employer coverage, nearly two-thirds (64.3%) are under age 35. If young, healthy individuals switch from employer coverage to the Exchanges, businesses forced to cover an older, sicker pool of workers could decide to drop coverage altogether. Consultants at Avalere Health estimated that a plan similar to Biden’s would cause at least 14 million people to lose coverage because their employer stopped offering insurance.

In January 2019, Biden’s running mate, Sen. Kamala Harris (D-CA), infamously said of the current health care system: “Let’s eliminate all of that. Let’s move on.” By undermining employer-based insurance, Biden’s health care plan would ultimately do just that.

For more information, or to read the entire report, click here.